The Financial Stability Oversight Council has released its annual report for 2024, highlighting various risks and concerns within the US and global financial systems. As in previous years, the report emphasizes the role of stablecoins and the broader digital asset sector, although it does not propose concrete measures to address these concerns. The council, composed of US financial agency heads, has repeatedly warned about the potential risks of unchecked stablecoin growth to the financial system.
The report notes that stablecoins operate outside of a federal regulatory framework, posing risks due to their size and vulnerability to runs. It urges Congress to pass legislation addressing stablecoins and market structure, citing issues such as market concentration and opacity. The report specifically mentions Tether's USDT, which accounts for approximately 70% of the global stablecoin market, as a concern for regulators.
The lack of a federal regulatory framework for stablecoins is also highlighted, with some states having their own frameworks but this being insufficient to address the council's concerns. The report states that many stablecoin issuers provide limited verifiable information about their holdings and reserve management practices.
While the council has warned that it may need to take action if Congress does not, it is unclear what actions it can take. The report also recommends that Congress pass legislation providing federal financial regulators with rulemaking authority over the spot market for crypto-assets that are not securities. Treasury Secretary Janet Yellen emphasized the need for legislation to create a comprehensive federal prudential framework for stablecoin issuers and to address the risks associated with crypto assets.